Many simply are at or near retirement age and may not have a succession plan and, like Patchett, are exiting the business altogether, brokers told Automotive News.
High valuations. Future worries spur some dealers to sell their stores.
Among the reasons: Lack of succession, concerns about EVs cutting their service profits, more talk of direct-to-consumer sales and not wanting to invest in facilities.
A range of factors — from concern over future electric vehicles impacting all-important service and parts profits to heightened talk of direct-to-consumer sales and not wanting to make investments in digital retail to compete with larger groups or to adhere to mandated facilities requirements — has persuaded some dealers to sell their stores, buy-sell brokers say.
“The sole proprietor that’s owning a dealership is above 70 years old right now … [and] you’re thinking about, well, ‘How much more money do I want to put into my business, and how much longer do I have before I don’t want to do this anymore?’ ” Schmidt said. “So all of these things are driving that. When you have a dealer body that is on the older side, any of these things are going to drive turnover.”
While Volvo store valuations could be impacted, Kerrigan has not seen a rise in Volvo stores going on the market.
“Many dealers are wondering about the changes that will come with electrification and the OEM changes that may come as a result of a desire to have a more streamlined sale process that is more direct to consumer,” Kerrigan added. “And that [Volvo] comment just further raised eyebrows of all dealers in their concern about the potential for OEMs to try and work around the franchise system.”
Dealers’ wariness isn’t just with digital EV sales, Kerrigan said, but with “one-price” mandates for new vehicles.
She said the change is big because dealers last year during the pandemic and even more so during the recent inventory shortage have been able to adjust pricing to help boost new-vehicle gross profits.
“In a one-price, online format, dealers would no longer have that lever to pull in the event that inventory shrank or in the event that sales decline,” Kerrigan said in April.
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